Vertex Announces Fourth Quarter and Full Year 2024 Financial Results

Quick Summary:

We encourage investors and others to review our financial information in its entirety, not to rely on any single financial measure and to view these non-GAAP financial measures in conjunction with the related GAAP financial measures.Vertex, Inc.and SubsidiariesConsolidated Balance Sheets(Unaudited)         As of December 31, (In thousands, except per share data) 2024  2023 Assets      Current assets:      Cash and cash equivalents $296,051  $68,175 Funds held for customers  30,015   20,976 Accounts receivable, net of allowance of $16,838 and $16,272, respectively  164,432   141,752 Prepaid expenses and other current assets  36,678   26,173 Investment securities available-for-sale, at fair value (amortized cost of $9,147 and $9,550, respectively)  9,157   9,545 Total current assets  536,333   266,621 Property and equipment, net of accumulated depreciation  177,559   100,734 Capitalized software, net of accumulated amortization  36,350   38,771 Goodwill and other intangible assets  363,021   260,238 Deferred commissions  27,480   21,237 Deferred income tax asset  19   41,708 Operating lease right-of-use assets  11,956   14,605 Other assets  14,073   16,013 Total assets $1,166,791  $759,927 Liabilities and Stockholders' Equity      Current liabilities:      Current portion of long-term debt $—  $2,500 Accounts payable  36,215   23,596 Accrued expenses  35,169   44,735 Customer funds obligations  27,406   17,731 Accrued salaries and benefits  14,581   12,277 Accrued variable compensation  45,507   34,105 Deferred revenue, current  339,326   290,143 Current portion of operating lease liabilities  3,995   3,717 Current portion of finance lease liabilities  77   74 Purchase commitment and contingent consideration liabilities, current  35,100   11,901 Total current liabilities  537,376   440,779 Deferred revenue, net of current portion  4,840   2,577 Debt, net of current portion  335,220   44,059 Operating lease liabilities, net of current portion  12,585   16,567 Finance lease liabilities, net of current portion  10   51 Purchase commitment and contingent consideration liabilities, net of current portion  87,400   2,600 Deferred income tax liabilities  9,918   — Deferred other liabilities  90   313 Total liabilities  987,439   506,946 Stockholders' equity:      Preferred shares, $0.001 par value, 30,000 shares authorized; no shares issued and outstanding  —   — Class A voting common stock, $0.001 par value, 300,000 shares authorized; 70,670 and 60,989 shares issued and outstanding, respectively  71   61 Class B voting common stock, $0.001 par value, 150,000 shares authorized; 86,481 and 92,661 shares issued and outstanding, respectively  86   93 Additional paid in capital  278,389   275,155 Accumulated deficit  (53,315)  (586)Accumulated other comprehensive loss  (45,879)  (21,742)Total stockholders' equity  179,352   252,981 Total liabilities and stockholders' equity $1,166,791  $759,927         Vertex, Inc.and SubsidiariesConsolidated Statements of Comprehensive Income (Loss)(Unaudited)                            Three months ended  Year ended   December 31,  December 31, (In thousands, except per share data) 2024  2023  2024  2023 Revenues:            Software subscriptions $152,597  $130,695  $567,124  $480,830 Services  25,859   24,219   99,652   91,557 Total revenues  178,456   154,914   666,776   572,387 Cost of revenues:            Software subscriptions  44,550   45,946   175,580   162,920 Services  16,785   15,365   65,071   60,888 Total cost of revenues  61,335   61,311   240,651   223,808 Gross profit  117,121   93,603   426,125   348,579 Operating expenses:            Research and development  19,586   12,898   66,666   58,212 Selling and marketing  47,431   37,041   170,574   140,237 General and administrative  39,920   36,865   152,835   145,936 Depreciation and amortization  5,521   3,801   20,953   15,202 Change in fair value of acquisition contingent earn-outs  17,500   —   17,500   — Other operating expense (income), net  267   5,489   (175)  6,502 Total operating expenses  130,225   96,094   428,353   366,089 Loss from operations  (13,104)  (2,491)  (2,228)  (17,510)Interest expense (income), net  (1,666)  4,022   (4,137)  4,164 Income (loss) before income taxes  (11,438)  (6,513)  1,909   (21,674)Income tax expense (benefit)  56,360   (21,847)  54,638   (8,581)Net income (loss)  (67,798)  15,334   (52,729)  (13,093)Other comprehensive (income) loss:            Foreign currency translation adjustments, net of tax  25,759   (7,558)  24,150   (5,978)Unrealized (gain) loss on investments, net of tax  13   (12)  (13)  (32)Total other comprehensive (income) loss, net of tax  25,772   (7,570)  24,137   (6,010)Total comprehensive income (loss) $(93,570) $22,904  $(76,866) $(7,083)             Net income (loss) per share of Class A and Class B, basic $(0.43) $0.10  $(0.34) $(0.09)Net income (loss) per share of Class A and Class B, dilutive $(0.43) $0.09  $(0.34) $(0.09)                                        Vertex, Inc.and SubsidiariesConsolidated Statements of Cash Flows(Unaudited)           Year ended    December 31, (In thousands)  2024  2023 Cash flows from operating activities:       Net loss  $(52,729) $(13,093)Adjustments to reconcile net loss to net cash provided by operating activities:       Depreciation and amortization   82,733   71,891 Amortization of cloud computing implementation costs   4,007   2,570 Provision for subscription cancellations and non-renewals   199   2,083 Amortization of deferred financing costs   2,033   266 Change in fair value of contingent consideration liabilities   14,925   — Change in settlement value of deferred purchase commitment liability   423   — Write-off of deferred financing costs   276   — Stock-based compensation expense   47,425   33,919 Deferred income taxes   51,068   (11,574)Non-cash operating lease costs   2,857   2,587 Other   (203)  5,335 Changes in operating assets and liabilities:       Accounts receivable   (22,076)  (45,222)Prepaid expenses and other current assets   (14,207)  (6,354)Deferred commissions   (6,242)  (5,774)Accounts payable   11,615   9,241 Accrued expenses   (12,323)  5,837 Accrued and deferred compensation   9,232   7,516 Deferred revenue   51,096   18,172 Operating lease liabilities   (3,999)  (4,224)Payments for purchase commitment and contingent consideration liabilities in excess of initial fair value   (4,367)  — Other   3,078   1,156 Net cash provided by operating activities   164,821   74,332 Cash flows from investing activities:       Acquisition of businesses and assets, net of cash acquired   (71,755)  — Property and equipment additions   (65,769)  (49,261)Capitalized software additions   (21,344)  (18,972)Purchase of investment securities, available-for-sale   (15,993)  (16,328)Proceeds from sales and maturities of investment securities, available-for-sale   16,710   18,390 Net cash used in investing activities   (158,151)  (66,171)Cash flows from financing activities:       Net increase in customer funds obligations   9,675   5,610 Proceeds from convertible senior notes   345,000   — Principal payments on long-term debt   (46,875)  (2,188)Payments on third-party debt   (3,904)  — Payment for purchase of capped calls   (42,366)  — Payments for deferred financing costs   (12,541)  (1,001)Proceeds from purchases of stock under ESPP   2,998   2,486 Payments for taxes related to net share settlement of stock-based awards   (21,516)  (9,701)Proceeds from exercise of stock options   8,459   4,839 Payments for purchase commitment and contingent consideration liabilities   (7,580)  (6,424)Payments of finance lease liabilities   (93)  (103)Payments for deferred purchase commitments   —   (20,000)Net cash provided by (used in) financing activities   231,257   (26,482)Effect of exchange rate changes on cash, cash equivalents and restricted cash   (1,012)  724 Net increase (decrease) in cash, cash equivalents and restricted cash   236,915   (17,597)Cash, cash equivalents and restricted cash, beginning of period   89,151   106,748 Cash, cash equivalents and restricted cash, end of period  $326,066  $89,151 Reconciliation of cash, cash equivalents and restricted cash to the Consolidated Balance Sheets, end of period:       Cash and cash equivalents  $296,051  $68,175 Restricted cash—funds held for customers   30,015   20,976 Total cash, cash equivalents and restricted cash, end of period  $326,066  $89,151            Summary of Non-GAAP Financial Measures(Unaudited)                 Three months ended   Year ended    December 31,   December 31,  (Dollars in thousands, except per share data) 2024 2023  2024 2023 Non-GAAP cost of revenues, software subscriptions $28,459 $30,357  $111,929 $106,038 Non-GAAP cost of revenues, services $16,146 $14,973  $62,303 $59,042 Non-GAAP gross profit $133,851 $109,584  $492,544 $407,307 Non-GAAP gross margin  75.0% 70.7%  73.9% 71.2%Non-GAAP research and development expense $17,334 $11,311  $56,395 $52,218 Non-GAAP selling and marketing expense $43,743 $34,371  $154,892 $129,216 Non-GAAP general and administrative expense $34,187 $31,426  $128,224 $124,925 Non-GAAP operating income $32,540 $28,239  $130,989 $85,646 Non-GAAP net income $25,483 $21,037  $100,984 $63,699 Non-GAAP diluted EPS $0.15 $0.13  $0.61 $0.39 Adjusted EBITDA $38,061 $32,040  $151,942 $100,848 Adjusted EBITDA margin  21.3% 20.7%  22.8% 17.6%Free cash flow $17,897 $28,843  $77,708 $6,099 Free cash flow margin  10.0% 18.6%  11.7% 1.1% Vertex, Inc.and SubsidiariesReconciliation of GAAP to Non-GAAP Financial Measures(Unaudited)                Three months ended  Year ended    December 31,  December 31,  (Dollars in thousands) 2024  2023  2024  2023  Non-GAAP Cost of Revenues, Software Subscriptions:             Cost of revenues, software subscriptions $44,550  $45,946  $175,580  $162,920  Stock-based compensation expense  (912)  (691)  (4,349)  (2,834) Depreciation and amortization of capitalized software and acquired intangible assets – cost of subscription revenues  (15,179)  (14,898)  (59,302)  (54,048) Non-GAAP cost of revenues, software subscriptions $28,459  $30,357  $111,929  $106,038                Non-GAAP Cost of Revenues, Services:             Cost of revenues, services $16,785  $15,365  $65,071  $60,888  Stock-based compensation expense  (639)  (392)  (2,768)  (1,846) Non-GAAP cost of revenues, services $16,146  $14,973  $62,303  $59,042                Non-GAAP Gross Profit:             Gross profit $117,121  $93,603  $426,125  $348,579  Stock-based compensation expense  1,551   1,083   7,117   4,680  Depreciation and amortization of capitalized software and acquired intangible assets – cost of subscription revenues  15,179   14,898   59,302   54,048  Non-GAAP gross profit $133,851  $109,584  $492,544  $407,307                Non-GAAP Gross Margin:             Total Revenues $178,456  $154,914  $666,776  $572,387  Non-GAAP gross margin  75.0 % 70.7 % 73.9 % 71.2 %              Non-GAAP Research and Development Expense:             Research and development expense $19,586  $12,898  $66,666  $58,212  Stock-based compensation expense  (2,252)  (1,587)  (9,548)  (5,994) Transaction costs  —   —   (723)  —  Non-GAAP research and development expense $17,334  $11,311  $56,395  $52,218                Non-GAAP Selling and Marketing Expense:             Selling and marketing expense $47,431  $37,041  $170,574  $140,237  Stock-based compensation expense  (3,103)  (2,075)  (13,204)  (8,380) Amortization of acquired intangible assets – selling and marketing expense  (585)  (595)  (2,478)  (2,641) Non-GAAP selling and marketing expense $43,743  $34,371  $154,892  $129,216                Non-GAAP General and Administrative Expense:             General and administrative expense $39,920  $36,865  $152,835  $145,936  Stock-based compensation expense  (4,060)  (2,946)  (17,556)  (14,865) Severance expense  (660)  (1,473)  (3,048)  (3,576) Amortization of cloud computing implementation costs – general and administrative  (1,013)  (1,020)  (4,007)  (2,570) Non-GAAP general and administrative expense $34,187  $31,426  $128,224  $124,925   Vertex, Inc.and SubsidiariesReconciliation of GAAP to Non-GAAP Financial Measures (continued)(Unaudited)                Three months ended  Year ended    December 31,  December 31,  (In thousands, except per share data) 2024  2023  2024  2023  Non-GAAP Operating Income:             Loss from operations $(13,104) $(2,491) $(2,228) $(17,510) Stock-based compensation expense  10,966   7,691   47,425   33,919  Depreciation and amortization of capitalized software and acquired intangible assets – cost of subscription revenues  15,179   14,898   59,302   54,048  Amortization of acquired intangible assets – selling and marketing expense  585   595   2,478   2,641  Amortization of cloud computing implementation costs – general and administrative  1,013   1,020   4,007   2,570  Severance expense  660   1,473   3,048   3,576  Acquisition contingent consideration  (300)  200   (2,575)  1,549  Change in fair value of acquisition contingent earn-outs  17,500   —   17,500   —  Transaction costs  41   4,853   2,032   4,853  Non-GAAP operating income $32,540  $28,239  $130,989  $85,646                              Non-GAAP Net Income:             Net income (loss) $(67,798) $15,334  $(52,729) $(13,093) Income tax expense (benefit)  56,360   (21,847)  54,638   (8,581) Stock-based compensation expense  10,966   7,691   47,425   33,919  Depreciation and amortization of capitalized software and acquired intangible assets – cost of subscription revenues  15,179   14,898   59,302   54,048  Amortization of acquired intangible assets – selling and marketing expense  585   595   2,478   2,641  Amortization of cloud computing implementation costs – general and administrative  1,013   1,020   4,007   2,570  Severance expense  660   1,473   3,048   3,576  Acquisition contingent consideration  (300)  200   (2,575)  1,549  Change in fair value of acquisition contingent earn-outs  17,500   —   17,500   —  Transaction costs (1)  41   4,853   2,032   4,853  Change in settlement value of deferred purchase commitment liability – interest expense  —   4,020   423   4,020  Non-GAAP income before income taxes  34,206   28,237   135,549   85,502  Income tax adjustment at statutory rate (2)  (8,723)  (7,200)  (34,565)  (21,803) Non-GAAP net income  $25,483  $21,037  $100,984  $63,699                Non-GAAP Diluted EPS:             Non-GAAP net income $25,483  $21,037  $100,984  $63,699  Interest expense (net of tax), convertible senior notes (3)  911   —   2,435   —  Non-GAAP net income used in dilutive per share computation $26,394  $21,037  $103,419  $63,699                Weighted average Class A and B common stock, diluted  162,939   162,369   161,774   161,761  Dilutive effect of convertible senior notes (3)  9,498   —   6,480   —  Total average Class A and B shares used in dilutive per share computation  172,437   162,369   168,254   161,761  Non-GAAP diluted EPS $0.15  $0.13  $0.61  $0.39                (1) The transaction costs for both the three months and year ended December 31, 2023 periods reflect costs associated with a public tender offer, which was withdrawn by the Company in January 2024. (2) Non-GAAP income before income taxes is adjusted for income taxes using the respective statutory tax rates for applicable jurisdictions, which for purposes of this determination were assumed to be 25.5%. (3) We use the if-converted method to compute diluted earnings per share with respect to our convertible senior notes.

In periods when the impact is anti-dilutive there is no add-back of interest expense or additional dilutive shares related to the notes.  Vertex, Inc.and SubsidiariesReconciliation of GAAP to Non-GAAP Financial Measures (continued)(Unaudited)                 Three months ended   Year ended    December 31,   December 31,  (Dollars in thousands) 2024  2023   2024  2023  Adjusted EBITDA:              Net income (loss) $(67,798) $15,334   $(52,729) $(13,093) Interest expense (income), net (1)  (1,666)  4,022    (4,137)  4,164  Income tax expense (benefit)  56,360   (21,847)   54,638   (8,581) Depreciation and amortization – property and equipment  5,521   3,801    20,953   15,202  Depreciation and amortization of capitalized software and acquired intangible assets – cost of subscription revenues  15,179   14,898    59,302   54,048  Amortization of acquired intangible assets – selling and marketing expense  585   595    2,478   2,641  Amortization of cloud computing implementation costs – general and administrative  1,013   1,020    4,007   2,570  Stock-based compensation expense  10,966   7,691    47,425   33,919  Severance expense  660   1,473    3,048   3,576  Acquisition contingent consideration  (300)  200    (2,575)  1,549  Change in fair value of acquisition contingent earn-outs  17,500   —    17,500   —  Transaction costs (2)  41   4,853    2,032   4,853  Adjusted EBITDA $38,061  $32,040   $151,942  $100,848                 Adjusted EBITDA Margin:              Total revenues $178,456  $154,914   $666,776  $572,387  Adjusted EBITDA margin  21.3 % 20.7 %  22.8 % 17.6 %               (1) The year ended December 31, 2024 period includes $423 for the change in the settlement value of a deferred purchase commitment liability recorded as interest expense.

Factors which may cause actual results to differ materially from current expectations include, but are not limited to: our ability to maintain and grow revenue from existing customers and new customers, and expand their usage of our solutions; our ability to maintain and expand our strategic relationships with third parties; our ability to adapt to technological change and successfully introduce new solutions or provide updates to existing solutions; risks related to failures in information technology or infrastructure; challenges in using and managing use of Artificial Intelligence in our business; incorrect or improper implementation, integration or use of our solutions; failure to attract and retain qualified technical and tax-content personnel; competitive pressures from other tax software and service providers and challenges of convincing businesses using native enterprise resource planning ("ERP”) functions to switch to our software; our ability to accurately forecast our revenue and other future results of operations based on recent success; our ability to offer specific software deployment methods based on changes to customers’ and partners’ software systems; our ability to continue making significant investments in software development and equipment; our ability to sustain and expand revenues, maintain profitability, and to effectively manage our anticipated growth; our ability to successfully diversify our solutions by developing or introducing new solutions or acquiring and integrating additional businesses, products, services, or content; our ability to successfully integrate acquired businesses and to realize the anticipated benefits of such acquisitions; risks related to the fluctuations in our results of operations; risks related to our expanding international operations; our exposure to liability from errors, delays, fraud or system failures, which may not be covered by insurance; our ability to adapt to organizational changes and effectively implement strategic initiatives; risks related to our determinations of customers’ transaction tax and tax payments; risks related to changes in tax laws and regulations or their interpretation or enforcement; our ability to manage cybersecurity and data privacy risks; our involvement in material legal proceedings and audits; risks related to undetected errors, bugs or defects in our software; risks related to utilization of open-source software, business processes and information systems; risks related to failures in information technology, infrastructure, and third-party service providers; our ability to effectively protect, maintain, and enhance our brand; changes in application, scope, interpretation or enforcement of laws and regulations; global economic weakness and uncertainties, and disruption in the capital and credit markets; business disruptions related to natural disasters, epidemic outbreaks, including a global endemic or pandemic, terrorist acts, political events, or other events outside of our control; our ability to comply with anti-corruption, anti-bribery, and similar laws; our ability to protect our intellectual property; changes in interest rates, security ratings and market perceptions of the industry in which we operate, or our ability to obtain capital on commercially reasonable terms or at all; our ability to maintain an effective system of disclosure controls and internal control over financial reporting, or ability to remediate any material weakness in our internal controls; risks related to our Class A common stock and controlled company status; risks related to our indebtedness and adherence to the covenants under our debt instruments; our expectations regarding the effects of the Capped Call Transactions and regarding actions of the Option Counterparties and/or their respective affiliates; and the other factors described under the heading "Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024, to be filed with the Securities Exchange Commission ("SEC”), as may be subsequently updated by our other SEC filings.

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Author / Journalist: Vertex Inc.

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Published On: 2025-02-27 @ 12:05:00 (10 hours ago)

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